Income Tax Act and Income Tax Calculation for FY 2018-19 for AY 2019-20

Income Tax Act and Income Tax Calculation for FY 2018-19 for AY 2019-20 for Employees and Teachers. Income Tax Deduction from Salaries During The Financial Year 2018-19 under Section 192 of the Income Tax, Act.1961. Vide Circular No 1/2019 F Govt of India has released the Guidelines for Calculation of Income Tax for Salaried Employees, Teachers for 2018-19. In this part you can gain knowledge about the normal tax rates applicable to different taxpayers.  The tax rates discussed in this part are applicable for assessment year 2018-19 i.e. financial year 2018-19. Deduction of income-tax from the payment of income under the head "Salaries" under Section 192 of the Income-tax Act, 1961 (hereinafter ‘the Act’), during the financial year 2018-19. The present Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2018-19 and explains certain related provisions of the Act and Income-tax Rules, 1962.

Income Tax Calculation 2018-19 and Income Tax Act for 2018-19

Rates of Income Tax for 2018-19 as per Finance Act 2015.
As per the Finance Act, 2016, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head "Salaries" for the financial year 2018-19 (i.e. Assessment Year 2019-20) at the following rates:
Normal tax rates applicable to a resident individual below the age of 60 years i.e. born on or after 1.4.1958
Net income rangeIncome Tax Rate
Net Income Up to Rs. 2,50,000Nil
Net Income Rs. 2,50,001 – Rs.5,00,0005% of (Total income minus Rs. 2,50,000)
Rs.2500 Tax Rebate if the Income is below Rs 350000/-
More Details Click Here
Net Income Rs. 5,00,000 – Rs.10,00,000Rs. 12,500 + 20% of (Total income minus Rs. 5,00,000)
Net Income Above Rs.  10,00,000Rs. 1,12,500 + 30% of (Total income minus Rs. 10,00,000)
Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be discontinued. However, a new cess, by the name “Health and Education Cess” shall be levied at the rate of four percent of income tax including surcharge wherever applicable, No marginal relief shall be available in respect of such cess.
Important Points for Income Tax Act for 2018-19:
  1. The income tax slab for individuals, females, senior citizen remains Same in the FY 2018-19. There is no change. The basic exemption remain at 2.5 lakhs. 
  2. Rs 40000 Standard Deduction: From F.Y. 2018-19 a deduction of forty thousand rupees or the amount of salary whichever is less shall be allowed as standard deduction.
  3. Reduced Tax for Lower slab: The tax rate for income between Rs 2.5 lakh to Rs 5 lakhs has been reduced to 5% from 10%.
  4. Rebate under Section 87A reduced to Rs 2,500: The income tax rebate under section 87A has been reduced from Rs 5,000 to Rs 2,500. Also the eligibility of taxable income limit has been reduced from Rs 5 lakh to Rs 3.5 lakhs.
  5. NO RGESS Tax exemption. Tax exemption under section 80CCG for RGESS (Rajiv Gandhi Equity Scheme) would NOT be available from FY 2018-19 on wards.
  6. Interest deduction on rented property capped at Rs 2 Lakh. Budget 2017 has bridged the gap between self-occupied and rented property by capping the deduction on home loan interest to Rs 2 lakh in both cases.
  7. Cash Donation Limit to Rs 2,000. Any donation above Rs 2,000 in cash would not be eligible for tax exemption u/s 80G. Donations have to be digital or by cheque to qualify for tax breaks.
  8. Tax-exemption to partial withdrawal from NPS. Partial withdrawal up to 25% of the contribution made by an employee would be exempted from tax.
  9. More tax deduction on NPS for self-employed. From next financial year self-employed individuals can claim deduction up to 20% of their gross income for contribution made to National Pension System (NPS). The limit was 10% earlier. This deduction is part of Section 80C and hence not very beneficial! Additional tax deduction on investment upto Rs. 50,000 under Section 80CCD (1B) will continue to remain the same for all NPS subscribers whether salaried or self-employed. 
    Method of Tax Calculation:
    1. Every person who is responsible for paying any income chargeable under the head "Salaries" shall deduct income-tax on the estimated income of the assessee under the head "Salaries" for the financial year 2018-19. The income-tax is required to be calculated on the basis of the rates given above, subject to the provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at the time of each payment. No tax, however, will be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs. 2,50,000/- or Rs.3,00,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.

    Pay and Salary and Other Income

    Income included in Salary in Brief:
    • Pay, DA, HRA, CCA, IR, Increments, Commissions, Leave Dues, Pay Advances, Surrender Leave, Pension, Bonus, Honorarium, Tuition Fee Reimbursement etc...
    Income excluded from Salary in Brief:
    • LTC, Gratuity, Commuted Pension, Tour/Transfer TA/DA, PF Payments, Medical Reimbursement, Educational Allowance. 
    • Any Income earned from other sources other than Salary shall also be shown in the Other Income.

    Deductions / Savings Allowed from Income Tax

    1. Professional Tax
    2. HRA (Conditions Applied. More Details Click on HRA Section Below)
    3. Interest on Housing Loan Advance
    4. Expenditure on Medical Treatment, Handicapped Dependent
    5. Donations to charitable Trusts
    6. And Savings in Salary or  which comes under 80C, 80CCC, 80CCD(1) i.e., APGLI, ZPPF, CPS, GIS, LIC, Term Deposits, Housing Loan Principal, Insurance Premium paid in this Year , 5Years  Fixed Deposits, Tuition Fees. (Only 1.5 Lakh will qualify from the Total of these Savings mentioned in this Point 7).
    More Detailed Information- Section Wise:

    Model Illustration on Calculation of Income Tax

    S.No. Particulars Rupees
    1 Gross Salary 5,20,000
    2 Medical Reimbursement by employer on the treatment of
    self and dependent family member
    3 Contribution of GPF 20,000
    4 LIC Premium 20,000
    5 Repayment of House Building Advance 25,000
    6 Tuition fees for two children 60,000
    7 Investment in Unit-Linked Insurance Plan 30,000
    8 Interest Income on Savings Account 8,000
    9 Interest Income on Time Deposit 15,000

    Computation of Tax

    S.No. Particulars Rupees
    1 Gross Salary 5,20,000
    2 Add: Perquisite in respect of reimbursement of Medical
    In excess of Rs.15,000/- in view of Section 17(2)(v)
    3 Income from Other Sources
    i) Interest Income on Savings Account Rs
    ii) Interest Income on Time Deposit Rs
    4 Gross Total Income 5,63,000
    5 a. Less: Deduction U/s 80C
    (i) GPF Rs.20,000/- (ii) LIC Rs.20,000/- (iii) Repayment of House Building Advance Rs.25,000/- (iv) Tuition fees for two children Rs.60,000/-
    (v) Investment in Unit-Linked Insurance Plan Rs.30,000/-
    Total =Rs.1,55,000/- Restricted to Rs. 1,50,000/-
    b. Less: Deduction u/s 80TTA on Interest Income on savings account (restricted to Rs 10,000/- - available only on
    Savings account interest) Rs 8000
    Total deduction available Rs 1,58,000/-
    6 Total Income 4,05,000
    7 Income Tax thereon/payable 7,750
    8 Add:
    Health & Education Cess @ 4%.
    9 Total Income Tax payable 8060